Reality sinks in for markets

The markets were under pressure through the week and though there was an attempt at recovery on expiry day nothing much happened. The markets closed with substantial losses at the end of the week with the BSESENSEX losing 536.44 points or 2.65 per cent to close at 19,727.27 points. The NIFTY lost 178.90 points or 2.98 per cent to close at 5833.20 points.

Slowdown effect: Markets are expected to open weak and look for recovery in the later part of the week

The broader indices like the BSE100, BSE200 and BSE500 lost slightly less at 2.63 per cent, 2.40 per cent and 2.24 per cent respectively. The BSEMIDCAP lost a mere 0.98 per cent while the BSESMALLCAP actually gained 0.21 per cent. The top gainer amongst sectoral indices was BSEHEALTHCARE up 1.55 per cent. The only other gainer was BSEIT up 0.31 per cent. The previous week’s best performer was last week’s biggest loser and BSEBANKEX lost 7.25 per cent. BSEREALTY continued to flounder and lost 7.13 per cent while BSEOIL&GAS lost 4.44 per cent.

Gainers In individual stocks the biggest gainer was BHEL up 6.43 per cent. Others included Hero Moto up 3.33 per cent and Sesa Sterlite (the new name for the merged entity Sesa Goa and Sterlite Industries) up 2.55 per cent. Private bank Yes Bank was the biggest loser down 14.48 per cent. Other losers included IDFC down 10.44 per cent, Union Bank down 10.13 per cent and Jindal Steel and Power down 9.20 per cent. Shares of group companies of beleaguered NSEL were down with Financial Technologies losing 13.38 per cent and MCX down 10.97 per cent.

Euphoria The previous week had plenty of hope and euphoria with the rupee appreciating, markets zooming and a new RBI governor. This week was one of introspection where optimism gave way to reality and the markets fell. The euphoria shown by the FIIs where they bought over 0.75 billion dollars of equity in a mere two days tapered off and this week they bought shares at a much slower pace with net purchases of Rs 604 crs while domestic institutions were sellers of Rs 368 crs. The Indian rupee was certainly less volatile but depreciated a tad to close at Rs 62.50, a net loss of 0.43 per cent.

Crisis The NSEL crisis seems never-ending and it appears the government has washed its hands of the issue. The FM has said that the exchange (NSEL) was in violation from day one and investors traded at their own peril. Multiple agencies are examining the exchange but there is no effort to help in recovery. It’s a sad state of affairs where Rs 5,600 crs of investors’ money is at stake and no one is the wiser. People seem to be forgetting that with almost every strata of society being pleased before the election through various schemes and also the setting up of the pay commission which would be effective from 2016, they would lose out on the investor class because of this action. This would be the third major stock market scam after Harshad Mehta and Ketan Parikh.

Trend The week ahead has a trading holiday midway on Wednesday, October 2, on account of Mahatama Gandhi’s birth anniversary. The markets are likely to turn the trend or there could be an increase in the momentum post this break. The Vice-President of the Congress party Rahul Gandhi made a dramatic speech at an unscheduled press meet on the ordinance involving tainted MPs and MLAs. The comment put the PM and the government to shame and with the PM currently in the US all eyes are on the PM to see how he would react. The PM has been ridiculed and one is sure this is an orchestrated attempt by the Congress to win brownie points in the ongoing slugfest between the various parties.

Pressure The markets are under pressure and in just over 10-12 days results for the second quarter will begin. There are no major expectations from these results as the effect of a slowdown are there for all to see. Monday also has the trade data coming which would give an indication of how the government is faring on the current account deficit front. RBI governor “RR” has said that he would refer to CPI (consumer price index) for inflation purposes which means that expecting any sort of rate cut in the next couple of review meets should be ruled out.

Forecast The week ahead would be choppy and would be dominated by political news from within the country. With a weak Dow Jones on Friday, it appears markets would open weak and look for some recovery in the latter part of the week. Key levels for the SENSEX are 19,350 and 20,100 while they are 5,730 and 5,960 for the NIFTY. The support for the SENSEX is at 19,607 points, then at 19,464 points, then at 19,293 points and finally at 19,075 points. It has resistance at 19,914 points, then at 20,065 points, then at 20,221 points and finally at 20,365 points. The NIFTY has support at 5,798 points, then at 5,735 points, then at 5,685 points and finally at 5,588 points. It has resistance at 5,888 points, then at 5,946 points, then at 6,028 points and finally at 6,123 points.

Arun Kejriwal is founder of the Mumbai-based advisory firm Kejriwal Research & Investment Services Pvt Ltd. Readers are invited to read more about these and other issues on his website http://ak57.in

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